The NBA: America’s Great Socialist Experiment

Last week, Jason Concepcion (aka netw3rk) wrote a piece for Grantland that was meant to help Englanders comprehend the finer points of the Atlanta Hawks – Brooklyn Nets game that was going to be taking place there later in the week.

Tanking is the act of prioritizing losing in order to increase a team’s chances of winning the NBA draft lottery. Since relegation doesn’t exist in the NBA (or any other major American sport), the only real penalty to being awful is shame. Conversely, the worse your team is, the better your chance of landing a choice draft pick.

It’s one of the great paradoxes of world sport: Why is it that Europe — with a longer history of, and comfort level with, socialism — loves a sport where the business is built on near-pure laissez-faire ideals, while America — with its long antipathy toward socialism — wants its sports economies to be bastions of income redistribution? Basically, tanking is like the dole [the British version of social security], but with a 16 percent chance of becoming a millionaire.

It deserves the chuckle it earns in context, but it’s actually a pretty interesting concept to explore:

Why is that we as Americans can’t accept what billionaire NBA owners have known for years, that laissez-faire economics doesn’t work in the long-term?

Before we go on though, to get those of you without a working knowledge of the finer points of the NBA Collective Bargaining Agreement up to speed, let’s do a quick run-through of the situation we have in the NBA:

Back in 2011, there was a lockout because the owners claimed only 10 of the 30 teams made a profit that year (approximately $150 million, combined) and that the other 20 were in the red (the numbers they gave were bullshit, but the general picture they painted was accurate).

The new Collective Bargaining Agreement (or CBA) signed after that lockout included a new revenue sharing system that calls for all teams to contribute an annually fixed percentage, roughly 50 percent, of their total annual revenue, minus certain expenses such as arena operating costs, into a revenue sharing pool.

Each team then receives an allocation equal to the league’s average team payroll for that season from the revenue pool. If a team’s contribution to the pool is less than the league’s average team payroll, then that team is a revenue recipient. Teams that contribute an amount that exceeds the average team salary fund the revenue given to receiving teams.

Roughly $120 million was exchanged between teams last year, and it’s forecasted that around $200 million will change hands this year.

According to Forbes, NBA revenues hit $4.6 billion for the league’s 30 teams last year, with the average NBA franchise’s net worth at $634 million, which is up 25% over last year.

Basically, this all means that because teams like the Knicks and the Lakers (the 1st and 2nd most valuable franchises, respectively) have the benefit of playing in large markets, they’re taking some of their revenue and using it to fund a pool that goes to teams that are losing money, like the Charlotte Bobcats, Milwaukee Bucks, and Memphis Grizzlies, all of whom turned a profit last season thanks to at least $10 million each in revenue sharing.

And now this is where a few short-sighted assholes might start calling bullshit on how it’s unfair that the Knicks and the Lakers had to give up some of their well-earned money. “It’s not the Knicks fault they have a huge fan base!” they might say, assholey. But the Knicks organization didn’t earn that fan base by producing a quality product, and any Knicks fan will agree with me on that one.

They just happen to be the team in the largest city in the country.

That team is, essentially, privileged to have that leg-up on the competition, much like how many of those that inhabit the upper tax brackets benefit from privileges like inherited wealth, access to great education, and powerful social networks.

But the thing is, even the Knicks and the Lakers know they can’t be left to run unbridled because, ultimately, it’s bad for the league as a whole — the league that they are very much a part of (much like how the 1% is still part of the 100% of us). In fact, Jeanie Buss, executive vice president of business operations for the Lakers and a member of the NBA’s planning committee charged with creating this new revenue-sharing plan declared:

Any business operator wants to keep their revenue. That’s the nature of the business, but we also understand the bigger picture and we want a league with teams that are economically viable so that every team has the opportunity to compete. It makes for a healthier league.

And there are benchmarks that must be met: small-market teams have to generate at least 70% of the league-wide average in total team revenue in order to receive full revenue-sharing benefits, and large-market teams must generate 130% of the league-wide team revenue average or else it must make up the difference in its own level of contribution.

Fred Whitfield, the president and COO of the Charlotte Bobcats, said, “For us, being a small-market team, we have the same goals and aspirations of large-market teams to compete for a championship, and the new plan gives us a chance.”

A chance.
That is what keeps the entire NBA afloat.

You never know what could happen on any given play, in any given game, in any given season. And if every team is given just a chance, there’s a chance that could be all they need. Every sports fan believes this.

And that’s all I think most people who believe in tax reform want every American to have.

A chance.

The whole “entitled to life, liberty, and the pursuit of happiness” thing.

Because we’re such a giant country who is part of an ever bigger global economy, it’s sometimes hard to remember that we are all part of one giant community. I mean, there are only 30 NBA teams; it was pretty easy to notice when something was wrong. When you’re talking 300 million people, that’s a hard system to throw so off-balance that everything comes tumbling down (the middle class squeezes well).

We’re one of the richest countries in the world. We’ve basically won at Capitalism. Hooray us. Now can we raise our collective IQ to the level of Knicks owner James Dolan (who is going through the most public mid-life crisis of all time)? I’m not saying we start wearing red and erecting statues of Chairman Mao — to quote Barack Obama, “People call me a socialist sometimes; you’ve got to meet a real socialist” — but can’t we just for like one second remember that not everyone is inherently blessed with sunny beaches and celebrities to lure marquee free agents with?